Coronavirus: Strategies to minimise Supply Chain Disruption

The Coronavirus outbreak has resulted in leading Chinese and multinationals being rocked by unforeseen supply chain forces and vulnerabilities.  In the midst of this crisis, Trade Link is working closely with customers, suppliers and partners to successfully navigate global supply chain disruption.  Here we share the key strategies that we undertake to help our customers mitigate disruption and plan for future events.

Coronavirus: supply chain impact

The mysterious coronavirus has killed more than seven hundred people at time of writing and virtually shut down one of the world’s most important growth engines.  A recent New York Times article highlights how China has become an essential part of the modern global industrial machine, accounting for roughly one-sixth of global economic output and is the world’s largest manufacturer.

The dependence on China’s output has led to hundreds of major manufacturers having their links to the global supply chain severed.  Measures put in place by the Chinese authorities to hamper the spread of the virus are impacting shipments moving through the region by air, rail and ocean, resulting in:

  • Major manufacturers having to close factories.
  • Leading multinationals re-routing their supply chains and seeking alternative suppliers in other regions.
  • Retailers having to shut stores.
  • Airline Operators having to cancel or postpone flights.
  • Steamship carriers are extending office closures and cancelling sailings.
  • Cross-border rail freight (e.g with Russia) is being stymied with full and partial border closures.

Against this backdrop one thing is certain: successful supply chain management of the crisis demands strong collaborative relationships with key suppliers and global partners.  Having the right partners, processes and game plan is critical to mitigating and managing risk, allowing companies to identify problems early on and resolve issues quickly.

Key strategies to minimise supply chain disruption

Trade Link is working with leading manufacturers throughout this immediate crisis on issues that range from supply of face masks to emergency air charter contingencies to establishing CKD hubs and supply networks.   To do this successfully requires flexibility, agility and robust communication processes.  Our on the ground teams are in regular communication with clients while our key account team participate in daily client conference calls in working together to put contingency solutions in place.  Our ability to exchange information quickly, make decisions fast and respond speedily to unexpected events, is of significant strategic advantage to our customers as the crisis unfolds.

“As an experienced partner with a deep network of relationships we are on the front-line for our customers, helping to lessen the impact of disruptions and enable customers to better avoid risks”,  says Anne Waldes, CEO at Trade Link.

Indeed, long before the coronavirus crisis had taken hold, Trade Link were observing a trend among multinational clients to rethink and redesign their supply chains against economic, trade and supply shocks.  In an article titled, ‘US-China trade-war:  multinationals rethink their supply chains’ we reported how the impact of tariffs and volatility in trade conditions were steadily eroding China’s cost advantage and prompting multinational clients to look at rebalancing their global supply chains.  The consequent reassessment is allowing clients to build greater resilience into their supply chains, to buffer against disruption and severed supply chains.

Working collaboratively with leading multi-national clients that have very complex global supply chains, we observe three key strategies being used to contain supply chain risk and build supply chain resilience.

The three key strategies vital to success are:

  1. Proactive Strategic Planning

More and more we observe mid-size and large clients establishing cross-functional supply chain risk management teams with processes that extend outside the company walls to suppliers, logistics partners and carriers.  With the right planning, processes and partners in place, our clients can increase their chances of preparing for changes and minimizing disruptions.  Advance planning activities include:

  • Broadening supplier networks and dual-sourcing strategy, negotiating a second source of supply;
  • Proper supplier due diligence and capacity risk reviews to allow for changes in volume and end-customer lead-time;
  • Supplier contract planning for insurance, indemnification and limitations of liability;
  • Logistics and multi-modal route planning in each region to cover critical, exception and standard shipments to identify and plan for premium or high capacity transit routes;
  • Review of inventory strategy to optimise service levels by increasing safety-stock levels for critical parts closer to the end-customer;
  • Establishing CKD operations in countries with high import taxes on finished products;
  • Preparing for customs and administration requirements within scenario route plans.
  1. Continuously Monitor risk

Customers that are proactive in risk management continuously monitor trends and events that might cause disruption in the global supply chain.  On an ongoing basis together with our customers we monitor the most relevant supply chain risks using internal and external software, data and social media channel sources to identify:

  • Regulatory risks & tariff changes;
  • Demand risk using customer analytics to predict changes in demand;
  • Supply risks of raw materials that may impact manufacture of finished goods;
  • Supplier and partner financial stability to identify risk exposure;
  • Industry risk in key areas of finance, technology and innovation;
  • Environmental risks including socio-economic, political, governmental, or environmental disasters;
  • Contingency risk plans to ensure they are relevant, robust with up to date information, contacts, procedures etc.
  1. Communicate, Communicate, Communicate

Communication across the supply chain between customers, supplier, partners and carriers is critical to proactively planning for disruption events and developing response strategies for prioritised risks.   It is essential to create robust communication processes and systems were information can be captured and shared in real-time.   Effective communication planning involves:

  • Having a clear communication strategy that facilitates multi-directional communication flow across markets and establishes a clear chain of demand for decision making;
  • Information management tools and supports that cater for disparate communication systems and levels of technology advancement in supply markets. In some markets for example, supplier communication may be reliant on more traditional methods, such as fax and telephone, while other more advanced suppliers and markets may be fully integrated with EDI visibility.  It is essential to have information sharing and communication strategies and procedures for all stakeholders and eventualities;
  • Embedding supply-chain risk management into regular decision-making and planning processes.

These perhaps simple yet highly effective strategies are the first step towards creating a truly resilient supply chain.  Working through each strategy will help your business identify the risks faced, and how to prioritise and address them.  For many clients, the priority is looking at products that have the greatest effect on profitability.  Once risks have been identified and prioritised, we can work with you to develop supply chain risk management and contingency plans.

If you would like supply chain risk management advice and support, we can help.  Trade Link develops and implements custom supply chain programs for leading automotive, industrial, retail and healthcare clients.  We work to improve all facets of their operations and mitigate against disruption.  Our experienced global specialists help organizations monitor their supply chain activities, identify weaknesses and make improvements.  Contact our team and discover how we can assist you.